In response to an outcry from angry policyholders, the British government said Friday it will launch an investigation into the collapse of Britain's oldest mutually owned insurance company, the Equitable Life Assurance Society.
The investigators hope to draw lessons about how to improve the conduct, administration and regulation of Britain's life insurance industry in the wake of a cash squeeze at Equitable Life that forced the company to slash pension annuities to many of its customers.
The probe, to be led by Scottish judge Lord George Penrose, comes on top of an inquiry by the Financial Services Authority -- Britain's financial watchdog agency -- into the sequence of events that caused 239-year-old Equitable to close its doors last year.
"Equitable Life raises important issues which deserve consideration by a full independent inquiry," said Economic Secretary to the Treasury Ruth Kelly.
Equitable is saddled with liabilities of ?1.5 billion (US$2.2 billion) as a result of its sale of pension policies offering guaranteed annuity payments of up to 11.5 percent. Equitable found the policies too costly to honor after interest rates fell sharply in the 1990s and caused its investment income to plummet. With expenses outstripping income, it announced plans in 1994 to slash payments to 90,000 policyholders.
RSS